Saturday, April 30, 2011

Noticing New York readers are in luck. Here I was thinking this post would be too late, but it’s not: You can still catch the documentary “Bill Cunningham New York” in New York area theaters. The sweetly charming Cunningham, a man of extraordinary magnanimity of spirit, is a beautiful nerd, a man who, by giving himself over entirely to his obsession with fashion, achieves a singular greatness few of us can ever hope to achieve. With his two contrasting photographic features appearing weekly in the New York Times, Cunningham meticulously and with relentless energy chronicles the upper echelon fashion at New York’s exclusive charitable soirees and, also, more important, street fashion.

I’ve met Cunningham a couple of times and found him to be exactly as charming as depicted in the film. As he is also something of a ubiquitously present street character, famously relying on his bicycle (his 29th) to traverse the city, you may realize upon seeing the film that you too have seen him busy at work without it ever registering who you were seeing. Concentrating on his work, Cunningham has a genial way of blending into the background as he happily snaps photos of woman’s footwear or other accouterments (or men's) whereas some other similarly preoccupied fellow might be have everyone around on edge with suspicions that he was some sort of fetishist.

Impressively, the film by Richard Press is apparently one of the first things Press has done. According to the narrative of the film, it took many years for him to persuade Cunningham, now in his early 80's, to consent to the project. Cunningham is still plying his trade and the bike riding seems to have kept him admirably spry.

Cunningham isn’t like your typical fashionista. Totally brilliant about style and what superb craftsmanship may be essential to the mechanics of achieving a look (Cunningham once designed hats), Cunningham isn’t a snob; he is totally egalitarian which is really the story behind his coverage of street fashion, something he is probably more responsible for than any other individual.

What Cunningham seems to value more than anything else is fashion courage as individuals find ways to express themselves. When he goes to the high society social soirees, the rich and powerful who go there to be seen and hob nob importantly don’t get photographed by Cunningham unless they are wearing something interesting. As one of our party on the trip to see the movie observed: “Cunningham is more of an anthropologist of fashion than anything else.” (This particular viewer from our party was back to see the film for the third time in one week. The rest of us were newbies.) Cunningham is quite aware of all the ways that fashion is used to signal the nuances of social strata; it is just that he doesn’t participate in those value judgments while observing them.

The only thing Cunningham might be a snob about could be an illegitimate pretenses of originality. Blessed with a remarkable memory of the fashion past Cunningham can readily exhume archived material to show when a design has been done before, sometimes, as the film shows, with devastating effect.

Intensely moral and scrupulous about his standards, Cunningham is unusual in the way he will not compromise his integrity. He refuses to be seduced into supporting any of the prevalent stratifying cruelties of the fashion world. It is interesting to learn that Cunningham (and therefore, to a significant extent, the New York Times) selects the multitudinous weekly charity events he attends based on what he thinks is the value of the work the charity is doing. Cunningham, will also, when attending society events, never accept food or drinks, not even so much as a glass of water.

A List of New York Reasons to See This Film

Here is a list of the particular reasons Noticing New York readers will want to catch this film, the trailer for which is below or you can find it here.

It will give you a prism through which to see the city and think about ALL the following subjects (and then some):

• The contrast between the elite high-cost fashion of the power brokers (making, for instance, decisions about rezonings and mega-projects using eminent domain) and the fashion that generates up from the street level is emblematic of many of New York’s most important contrasts. One doesn’t have to scrutinize it very hard to find in it the Robert Moses/Jane Jacobs dichotomy of city life. A Cunningham quote from the trailer: “The best fashion show is always on the street; always has been and always will be.” And here is a quote from the New York Times review that sounds like an admonition lifted from Jane Jacobs herself: “I let the street speak to me, and in order for the street to speak to you, you’ve got to stay out there and see what it is.” The Times review also comments: “Mr. Cunningham has molded himself into the designated noticer and interpreter of the city. . .” - Humm, a “noticer”. . .

• Biking as an alternative form of transportation, biking in all weather, where to keep a regularly used bike if you own one, the possibility of accidents, where to lock up bicycles on the street and the frustrating rate of bicycle theft. Also, the concern of finding bike-friendly apartments and workplaces.

• The difficulty of finding an apartment. The film was made when Cunningham, on the presumably restricted salary of a journalist, needed to find a center-city replacement for his extremely modest apartment which apartment he gives over, almost entirely, to his work, with file cabinets occupying almost all the space.

• Whether charities to whom the city dispenses special privileges such as tax exemptions are serving the purposes once envisioned or are just submerging indistinguishably into the dull grey corporate mesh of things. The reason Cunningham had to look for a new apartment was his eviction from his studio apartment in Carnegie Hall Towers, a saga in itself. The movie looks in on its waning days. For more than a hundred years the Carnegie Hall Towers studio apartments, once numbering 170 in all, had been occupied by an intermingling collective of musicians, dancers and artists who lived and spent time there, including Mark Twain, Marlon Brando, Leonard Bernstein, Norman Mailer, Agnes de Mille, Martha Graham, John Barrymore, Garson Kanin, and Isadora Duncan. When built by Andrew Carnegie, the spaces were specifically designed as workable living space with artists in mind, with high ceilings and north-facing skylights. The Carnegie Hall Corporation began evictions to clear the building of artists with steep rent increases in 1981 and the protracted struggle to clear the building of artists didn’t end until the final eviction in 2010.

• The way that charity event life meshes with money and power (and therefore, the astute will extrapolate, politics and political agenda.)

• Whither the New York Times? The future of the city, at least for the time being, is probably inextricably linked with the New York Times. As Cunningham’s work now and over the years has mostly been for the Times the film provides a valuable window into the culture of the paper, including a scene with Times publisher Pinch Sulzberger (called "Pinch" because his father was nicknamed "Punch"). A lot of the film is shot inside or just outside of the New Times building that the Times, employing eminent domain, built in a business partnership with Bruce Ratner, the notorious politically-connected subsidy collector reviled for Atlantic Yards, (a mega-project the Times refrains from criticizing or scrutinizing). The Times review of the film describing Cunningham as “legendary” gets a lot of its assessments right. See: Bill Cunningham New York (2010), By Carina Chocano, March 15, 2011. See also this Times coverage: March 23, 2010, Capturing the Elusive Bill Cunningham, by David W. Dunlap.

• The mores of journalism: If the future of the city is inextricably linked to the Times, it is also inextricably linked to the mores of professional journalists. It’s doubtful that Cunningham’s standards are representative of the ethical standards of journalism in the city in general, but the film supplies ample meditation on the subject, including the temptations involved. Among other things Cunningham consciously avoids taking money for much of the work that he does in order to maintain his journalistic freedom. A Cunningham quote from the trailer: “You see, if you don’t take money then thay can’t tell you what to do. That’s the key to the whole thing.”

• The fight to save the city’s garment district beset by globalization together with Bloomberg administration upzonings. The Bloomberg administration may or may not be interested in earnestly taking steps to preserve area rather than have it be displaced by financial institutions. In the film Cunningham talks with people he knows from the industry attending a demonstration to save it. Cunningham discusses with these insiders the way firms in this once key business have been driven out of the city.

• Parks. On the weekends Cunningham is photographing the fashion action in Central Park.

• Enthusiasm and energy. The film is all about the kind of enthusiasm and energy that makes the city so identifiably New York.

You will probably come away from the film feeling inspired and uplifted, finding Cunningham an endearing marvel of a man, even as you still are still agog at the improbable and eccentric gift to New York Cunningham has chosen to make of himself.

Tuesday, April 26, 2011

This week is was impossible not to notice that the New York Times was prominently featuring the number “585" for a short little blurb of a story featured in its "News of the Week in Review" section. Turns out they were counting wealthy Chinese. (See: Prime Number, Published: April 23, 2011.) The Times was taking note that 585 is the estimated number, in the thousands, of people in China who this year will have investable assets of $1.5 million or more. This was according to a study by Bain & Company, a Mitt Romney connected consulting firm.The number, the subject and the calculation couldn’t help but remind us all of another number, “498" which is the number of Chinese that Forest City Ratner is soliciting to “invest” $538,000 in order get American government issued green cards that Forest City Ratner is being allowed to sell more or less exclusively for its own private benefit. After some time (five years), the Chinese are supposed to get back less money ($500,000) which, other than their green cards, constitutes the return on their investment provided the deal Forest City Ratner has structured for them doesn’t tank. This all has to do with something known as the federal EB5 program, a program Congress created supposedly to produce jobs in the U.S. but which Forest City Ratner is taking advantage of in a non-job producing way. Essentially, the Ratner firm is abusing the EB-5 program in a way that Congress is now letting it be abused: Ratner is selling United States green cards to rake in cheap capital without producing jobs.

In other words, if, as reported in the Times, there are 585,000 Chinese who have $1.5 million or more to invest, 489 of them, or one out of every 1,197 of this them are expected to pony up $538,000 of that available $1.5 million to pay Forest City Ratner for green cards.

The Times article seems rather too short in that it simply doesn’t bring the numbers home. If the Times is interested in how many millionaires there are in China mightn’t it then be interested in what portion of that elite cohort is sending their money to the United States particularly if such a substantial portion of all that money is coming into this country in a federal program that is being abused?

Fact is though, the Times has been passing up (virtually ignoring) the EB-5 abuse story and all its ramifications that among other things would necessarily lead them to reporting some unflattering things about Forest City Ratner, their business partner when it came to building the New York Times headquarters for which, like Ratner’s Atlantic Yards mega-monopoly, eminent domain was used.

As pointed out in an earlier Noticing New York post, the Times mangled its last report about the non-job-creating EB-5 programs use in connection with Atlantic Yards:

Perhaps what mightily facilitates the ease with which the EB-5 program is abused is that it is not known by any formal title, like the American Jobs Creation Act, leaving the New York Times to struggle as it refers to Ratner’s `enrollment’ of “498 Asian investors” in “an obscure federal program that grants [“sells” is a better word] green cards in exchange for a $500,000 investment in a job-producing American project,” thereby stumbling compliantly into having referred to `job-production’ which is, as discussed, actually nonexistent.

In other words, this Times story made it sound as if Ratner is using the program to create American jobs, which isn't a fair report of what is actually happening.

(BTW: Neither 585 nor 489 is a "prime number"-- That's aside from the fact that the 489 Chinese investors won't prime the American economy.)

To catch up with more stories about the EB-5 program here are some links:

Saturday, April 23, 2011

(Image above is from Bloomberg’s PlaNYC website.- The graph shown is not up-to-date. If corrected the second green triangle approximately over 2010 should be down more or less level with the blue square over the year 2000, because the city hasn’t actually grown much under Bloomberg.)

Yesterday was Earth Day and Mayor Michael Bloomberg has recently been busy getting himself into the news to claim credit as an environmentalist. On Wednesday of last week (the 13th) he and former President Bill Clinton announced that they were merging the global climate groups that they head (Bloomberg and Clinton to Merge Climate Groups, by Michael Barbaro, April 13, 2011) and yesterday on Earth Day itself, Bloomberg announced an update to his PlaNYC 2030, considered to represent his current environmental agenda (City Issues Rule to Ban Dirtiest Oils at Buildings, by Mireya Navarro, April 21, 2011.)

The announcement with Clinton got Bloomberg this adulatory lead in from the Times:

Mayor Michael R. Bloomberg and former President Bill Clinton, two of the most influential spokesmen for environmental sustainability, will merge their global climate groups under a plan announced on Wednesday.

The Earth Day announcement respecting what is supposed to be a significant update on to the PlaNYC 2030 sustainability initiative Bloomberg launched on Earth Day in 2007 was treated more mundanely by the Times, which focused on a new ban on the burning of dirtier fuel oils that the Rent Stabilization Association has announced it will fight:

The new rule, announced on Thursday by Mayor Michael R. Bloomberg as part of an update to his environmental agenda, known as PlaNYC, affects about 10,000 buildings that burn the dirtiest types of heating oil: No. 6, the cheapest oil pumped into aging boilers; and No. 4, another heavy oil that is only slightly less noxious.

Atlantic Yards Report has already posted a review of the plan’s updates which notes how awkwardly the non-environmentally advised Atlantic Yards Ratner mega-monopoly fits in with attempts to openly, and transparently plan coherently for a sustainable environmentally sound future. Saturday, April 23, 2011, PlaNYC update: an Atlantic Yards mention (for water mains!) and potential reconsideration of parking requirements. The post focuses mainly on how parking should not be a prominent feature of high-density projects near mass transit facilities. The other connection with Atlantic Yards is that, from its inception, PlaNYC has called for building platforms over railyards and highways to create new areas for housing.

Here is one thing that, with the recently released update on PlaNYC, deserves notice for its non-updated status. The just updated PlaNYC still incorporates what are probably grossly erroneous population projections.

What makes the continued misestimation of these figures all the more startling is that these highly dubious population projections are credited with sparking Bloomberg’s environmentalism and more or less the plan itself. Below is an extract from the Times also extracted in the original Noticing New York environmental quiz article, beginning with a quote from James F. Gennaro, chairman of the City Council’s Committee on Environmental Protection, about how Bloomberg had an environmental change of heart (after Al Gore’s “Inconvenient Truth”) :

It was not an epiphany, but federal census data that prompted the mayor to act, aides said. The numbers suggested that the city would grow by a million residents by 2030, which would lead to heavier traffic and more use of electricity at the same time that the city would be grappling with floods and other effects of climate change.

So what was the core seed for the gestation of the plan, Bloomberg's near epiphany with respect to projected population growth, has not been changed in his plan even though it has now been found to be almost certainly incorrect.

Not only have the population projections not been changed in the plan (see the chart at the start of this post that also remains unchanged on the website), the old numbers remain firmly anchored in the plan.

How do you know our population will grow by almost one million more people?

The Population Division of the Department of City Planning has done a detailed projection of the City's population. This analysis, done on the level of each borough, has taken into account the current age and sex breakdown of the population; birthrates by borough; immigration patterns (not based on origin); life-spans; and patterns of people moving out of the City. With this information, we strongly believe that the City's population will grow, primarily due to three factors: continued immigration; New Yorkers are choosing to stay in their city longer, rather than moving out to the suburbs or to another city; and finally, we are living longer. For these reasons, our population of school-age children will not increase dramatically, but we will have many more seniors.

That in turns links to:

• The mayor’s quite antiquated December 13, 2006 Press Release about how the city was going to grow to 9.1 million people by year 2030

• The mayor’s December 12, 2006 speech regarding planning for a sustainable future, saying that by 2030, the city population will reach more than 9 million.

• a "Full Report" (33 pages) – a detailed analysis of the total population projected to 2030, as well as the projected school-age and elderly populations (includes an in-depth description of the projection methodology).

• a "Briefing Booklet" (26 pages) – on the population projection methodology and the major findings.

New York City’s population is still growing. By 2030 we project that our population will increase to more than 9 million

Why is this important? One reason is that the projections for enormous population growth have been used as a backdrop to help justify the Bloomberg-style mega-development that begins with tearing things down while not having terrific success at replacing what gets demolished. It is also interesting to note that in 2007 Bloomberg's Director or the Budget, Mark Page, was factoring in this assumed population growth when calculating his balancing of the budget.

We don't want to discourage city officials to work had and in earnest to make the possibilities of each Earth Day more promising. Certainly many of them are working very seriously in this regard. The reminders here are so that when Bloomberg sallies forth each Earth Day people shouldn't focus on automatically giving him personal credit that isn't due. In fact, this is not the kind of reaction Bloomberg can always count on. Earth Day is not always a good pres day for him.

Friday, April 22, 2011

This turns out to be the second in what will now be a series of articles inspired by recent courses I’ve been taking to bank additional CLE (Continuing Legal Education) hours required in connection with continuing my state registration as an attorney. The first such post I put up concerned reverse morals clauses in celebrity contracts of interest to me particularly because of Jay-Z’s involvement promoting the Atlantic Yards mega-monopoly in Brooklyn and also because of Jay-Z’s wife Beyoncé’s morally questionable performance for the Gaddafi clan. (See: Friday, April 8, 2011, “Reverse Morality” Clauses for Celebrity Endorsers: What Are They? Something Celebrities, Including Jay-Z, Should Try Enforcing.) (Beyoncé has also been of assistance in promoting the destructive Atlantic Yards megadevelopment.)

Legal Ethics of Working For the Unethical

For this go-round the subject is again ethics, and again the ethics of working for someone who is behaving unethically. For lawyers it will hit a little closer to home. This time the subject is when lawyers have an ethical duty to withdraw from representing a client who is behaving dishonestly.

An important contribution to the morning’s success was NYU School of Law Professor Stephen Gillers moderating the discussion. Also present and participating in the discussion were the Paul Weiss attorneys: Claudia L. Hammerman, Jeffrey D. Marell and the wonderfully gruff Gerald E. Harper. (Gruff frankness goes a long way when discussing legal ethics.)

(panel above: Gillers, Marell, Hammerman and Harper)

As Professor Gillers’ official NYU biography makes clear he is a specialist in legal ethics. For those of you who missed the Paul Weiss program, Professor Gillers will soon be giving another CLE legal ethics course for the City Bar of New York on Wednesday, April 27, 2011 from 6:00 p.m. to 9:00 p.m.: Current Legal Ethical Issues. The City Bar is advertising Professor Gillers as a “nationally renowned ethicist and well-regarded speaker.”

Lawyerly Noise About Selling Misrepresentations

While all the topics covered during the morning were interesting (and I will write about another of them in a later post) the topic that I will deal with here concerns a lawyer’s ethical responsibility if, when representing a client-seller in the course of a sales transaction, the lawyer becomes aware that the client is submitting false information about what is being sold to the buyer.

What is the lawyer obligated to do? We were told during the discussion that the lawyer can’t be an aider and abettor to the perpetration of a fraud, that the lawyer likely has to withdraw from the matter but that even withdrawal from the matter may not alone be enough to satisfy ethical concerns. Especially if the lawyer was involved in transmitting false information, it may be incumbent upon the lawyer to make what is referred to as a “noisy withdrawal” from the transaction. While a lawyer can’t actually say that his client has lied, a “noisy withdrawal” where for example the lawyer “retrieves or takes back” the false information the lawyer was involved in delivering sends a definite “signal” to the other side that will allow them to investigate to discover for themselves what is amiss. That the lawyer responds, when asked why he is taking back documents by saying, “I can’t tell you” only “exacerbates the noisiness of the withdrawal.”

Rules, Rules

Rule 1.6 (b) (3) of the New York Rules of Professional Conduct (the ethics rules New York attorneys are supposed to follow) is specifically written to permit such noisy withdrawals, “where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud.” The American Bar Association model rules, adopted in some form in 46 jurisdictions, actually go further in possibly mandating the disclosure of otherwise confidential information to rectify or prevent a fraud whether or not the lawyer transmitted something he can retract.

Dealing With the Root of the Problem

Of course, things may not get so dramatic as a withdrawal. The lawyer’s first step probably will and should be to go to the client and tell the client that they need to correct the record because at this point the lawyer can no longer allow the transaction to move forward. Professor Gillers quoted Elihu Root, lawyer, statesman (including U.S, Secretary of State), and Nobel Laureate who said:

About half the practice of a decent lawyer consists of telling would-be clients that they are damned fools and should stop.

A Dramatically Raised Ante

On the other hand things can get much more dramatic if the lawyer doesn’t withdraw from assisting the transaction when he/she should. Assisting the client who has engaged in fraudulent activity (as defined by the substantive law) in exploiting that fraud by going to closing can make the lawyer liable to the buyer for damages (as would also be the lawyer’s client, the seller). In fact, it was pointed out that clients like these often go bankrupt while law firms have malpractice insurance (a source to recover damages from), and therefore lawyers are increasing being sued in such situations. The rule is that once the lawyer knows that false information has been transmitted the lawyer cannot help the client exploit the falsity by helping the client accomplish the sale.

Hypothetically Framed

The discussion was framed with the aid of an orally summarized hypothetical that focused in on the fact that some of the numbers given to the buyer were wrong. There was also a written version of that hypothetical furnished under the heading of “Lawyer Liability to Third Parties”:

You represent a company selling one of its subsidiaries to a buyer. You have transmitted various financial documents from your client to the buyer’s counsel based on which the buyer formulates its bid, which is accepted. Prior to closing, you learn that your client changed some of the numbers to make the subsidiary appear more profitable than it is. What do you do? Does it matter what you said about the documents in your transmittal to opposing counsel?

Does the answer change if you learn about the alterations after the closing but the buyer still remains ignorant of them?

Closing In On the Answer

Despite that phrasing of the hypothetical it was made clear that for the most part, it probably doesn’t make a difference whether the lawyer transmitted the false information or the client did. As for the question of whether the transaction had already closed makes a difference (because the reduced possibility the buyer would alter their conduct or be able to mitigate damages), Paul Weiss partner Gerald Harper had this view:

The ability to withdraw the statement persists and the fact the transaction has closed doesn’t strip you of your right to take back any statement that you sponsored as a lawyer to the counterparty. I don’t think it matters whether the transaction is closed or not. You are free to withdraw any fraudulent statement that you, as a lawyer sponsored, and I think I would do that.

Mr. Harper qualified this by saying that in the real world the lawyer is going to go back to his client first, explaining that if they don’t correct the matter they will be sued for fraud.

Noticing New York Question: Does the Rule Apply To. . .

At this point most Noticing New York readers have probably guessed where we are heading. When the session commenced Professor Gillers had stated that each of the four hypotheticals that would be discussed during the day “brings up an issue that could arise in any practice any time.” I was chomping at the bit to ask the first question. The following is my exchange with Professor Gillers:

MDDW: This will test the notion that these hypotheticals transpose to all practice areas: Say you are representing the developer of a publicly financed real estate project, so, in essence, the public is the buyer- Do you think this principle applies there as well if the developer has misrepresented the project?

PROF. GILLERS (being careful to precisely define the situation): To whom has the developer misrepresented the project?

MDDW: You could consider either that it has been misrepresented to the public or that its been misrepresented to the public officials who are responsible for handling the project.

PROF. GILLERS: My answer is yes, it applies there as well. I suppose federal securities laws can apply there as well, but here we are talking about the state common law of fraud, but yes, it applies there as well. It doesn’t have to be an A to B sale of private parties. I don’t see why it couldn’t apply.

As you see from the above, I did not mention any particular publicly financed real estate project but certainly some come readily to mind, foremost among them probably being Atlantic Yards. Before applying what Professor Gillers said above to a project such as Atlantic Yards it should be remembered that exchanges at a legal conference are never intended to constitute actual legal advice and Professor Gillers had not been asked to consider a specific set of real world facts.

Non-Facts

Further, after the questions (one involving lawyer suspicion rather than knowledge of client misconduct), Professor Gillers had more to say on the subject that would be relevant to any evaluation of the ethical conduct of the lawyers working for Forest City Ratner on Atlantic Yards. Specifically, the rules of misrepresentation are different for what are considered “non-facts,” which extend to “predictions,” the idea of “puffing and exaggeration” and “prospective events” we might even be talking about dubious assumptions and insufficiently backed up assertions.

While it can clearly be said that the Atlantic Yards has regularly and routinely been grossly misrepresented to the public, those who would defend the ethics of the lawyers working to further Ratner’s project-promoting goals would certainly argue that all these misrepresentations are in this “non-fact” category, amounting to no more than “puffing and exaggeration” with respect to the prediction of prospective events and that no matter how misrepresentative of the project it is, Forest City Ratner is no more than the permissible purveyor of dubious assumptions and insufficiently backed up assertions.

The Politics of Actually Non-Factual

One question that comes to mind is whether lawyers consider that a different standard does apply to Forest City Ratner and perhaps any developer that does publicly financed projects, the thinking being that when you are talking about projects financed by the public one has entered the realm of politics, a realm where truth is no longer important and “factual statements” take on entirely new definitions. A recent example of the extreme we have gone to in this regard was when an aide to Senate Minority Whip Jon Kyl (R-Ariz.), condoned Kyl’s senate floor whopper that abortions are, “well over 90% of what Planned Parenthood does” (only 3% of what Planned Parenthood does relates to terminating pregnancies) by saying the senator’s declaration of the percentage “was not intended to be a factual statement.” The political humorists are rightly having a field day with this “not intended to be a factual statement” ploy, Stephen Colbert and Wait Wait...Don't Tell Me! included.

Maybe in the political realm one can get away with virtually any misrepresentation of the truth no matter how “factual”sounding the statements appear to be. But would the perpetual Forest City Ratner promotions be acceptable if Ratner were foisting the transaction on a private party instead of the New York taxpaying public? The idea that a distinction might exist is an intriguing theory worthy of consideration but not necessarily the law.

The following Noticing New York article provides more than a baker’s dozen bullet listed items cataloging other misrepresentations involved in selling Atlantic Yards to the public: Tuesday, December 1, 2009, Unfair Substitution of Fiction For Fact in the Atlantic Yards Dialogue. One can go through them analyzing which of the misrepresentations might be sufficiently “factual” to invoke the question of legal fraud but certainly huge deceptions have been perpetrated. Adding to the list, Ratner's vastly exaggerated claims about `creating jobs' has recently been a focus of recent news.

One area where it seems that misrepresentations of fact did occur is with respect to the misrepresentations to Justice Marcy Friedman about the legitimately expected timetable for the development of the mega-project was: With lawyer assistance it was represented to the justice that Forest City Ratner and ESDC officials expected to complete the project within ten years while withholding from her (and the plaintiff parties representing the public in opposing the project) documents between them providing for and clearly envisioning a multi-decade build-out.

Similarly, sale of the EB-5 investments to prospective Chinese “investors” has been rife with misrepresentation. Technically, the misrepresentations being made to the Chinese are being made to them as private parties on the other side of a business transaction (rather than just an unwitting public being subjected to a spiel) so a high standard should apply respecting any misrepresentations. On the other hand is there thinking that as the Chinese are not American citizens they should not be expected to benefit from the full protection of U.S. law?

Addendum on Paul Weiss and Atlantic Yards

Although it may sound a little bit like biting the hand that legally educates you (and lets you munch a Pierre Hotel mini-bagel breakfast) I didn’t think I could conclude this article without researching whether the Paul Weiss firm had involvement with the Atlantic Yards project. It turns out they have. It was not surprising to discover this given that something that facilitates big development (and potentially helps mute criticism) is the way a lot of work can be spread around the professional community. The bigger your firm is- and Paul Weiss is a very big firm- the more likely you will be on the list.

Here is what I found involving partners in two departments at the firm:

Meredith J. Kane, a partner in the Real Estate Department and a member of the firm's Management Committee, who “regularly represents developers, equity investors, institutional and entrepreneurial owners and government agencies in all aspects of development, finance” and whose “experience includes all aspects of the finance and development of complex public/private joint venture projects” has, according to her page on the firm’s website worked on:

the development of MTA’s Atlantic Yards in Brooklyn as a proposed new development of up to 16 residential and commercial buildings

Astute readers will quickly note that the reference to the MTA’s “Atlantic Yards” rather than being to the MTA’s “Vanderbilt Yards” is reflective of a basic problem the MTA had in negotiating its transaction with Ratner and also when it handed the property over to Ratner at a below-market price with a less-than-real feint at a bid process: The MTA was treating its publicly-owned land (the Vanderbilt Yards) as constituting a project deemed to be already owned by the developer (Atlantic Yards.)

Here is more from the Paul Weiss website advertising this aspect of their involvement with some better language, but it nevertheless refers to “Atlantic Yards” as if it is the MTA’s development project which is arguably inaccurate:

MTA's Atlantic Yards Development Project Closes

We represented Metropolitan Transportation Authority in the sale to Forest City Ratner Companies of the air space development rights over MTA's Vanderbilt Railyards to be included in the multi-billion dollar Atlantic Yards development project. Under the State approved project plan, which covers 22 acres in the Brooklyn, New York neighborhoods of Prospect Heights and Park Slope, Forest City is to build a new arena for the Nets basketball team, as well as up to 16 residential and commercial buildings and a new railyard facility for MTA. Much of the residential and commercial construction is to occur on platforms to be constructed by the developer over the MTA Railyards.

Also, in November 2005, Ms. Kane was a featured speaker at a Pace University Real Estate Law Institute seminar on "Reinventing Redevelopment Law" which looked at the roles of the public and private sector in major urban redevelopment projects including Ratner’s MetroTech and Atlantic Yards.

A second partner of the firm, Daniel J. Leffell, in the litigation department, was also involved with Atlantic Yards. According to his page on the firm’s website Mr. Leffell’s “successful representations” include:

Montgomery v. Metropolitan Transp. Auth., 25 Misc. 3d 1241A (Sup. Ct. N.Y. Co. Dec. 15 2009) (successful defense of the New York Metropolitan Transportation Authority against a challenge to its sale of property for the Atlantic Yards development project)

The “Montgomery” in that case is State Senator Velmanette Montgomery (18th District) and “Montgomery” is an abbreviated stand-in for the entire list of plaintiffs who in that case were suing the MTA. Also suing the MTA were Assemblymember Jim Brennan (44th District), Assemblymember Joan Millman (52nd District), NY City Councilmember Letitia James (35th District), NYPIRG/Straphangers Campaign and Develop Don’t Destroy Brooklyn.

The plaintiffs were suing the MTA because it violated the still fresh-on-the-books Public Authorities Accountability Act of 2005, an effort by the state legislature to reform and rein in public authorities. The suit was brought because MTA failed to obtain an independent appraisal of the Vanderbilt Yards or seek out competitive offers for the Vanderbilt Yards property after a last minute rush was used for Forest City Ratner to get through a restructuring of the mega-deal into a plan far worse for the public than what original misrepresentations said would be provided. The case was lost when State Supreme Court Justice Michael Stallman found, among other things that the elected state legislative officials who enacted the public authorities reform law were not entitled to seek its enforcement to benefit the public (and under the theory that probably no on else is either, the law might thereby be nearly unenforceable).

In other words, Mr. Leffell’s page advertises that he was successful in preventing the plaintiff state legislators from doing anything more effectual than loudly crying foul when Forest City Ratner side-stepped honoring its dubiously intended exaggerations about what it would one day prospectively provide the public.

This article has concerned itself principally with the ethical obligation of attorneys directly representing Forest City Ratner in making misrepresentations. The question of attorneys representing the public officials dealing with Ratner who are supposed to, in turn be representing the public, is another more difficult one, complicated mightily by the terrific extent to which Ratner’s goals have seemingly, without question, been adopted by many public officials as their own.

The state legislators who sought to enforce the reform measures of the Public Authorities Accountability Act (and others of us as well), probably feel that the public was not well served when the MTA succumbed to Forest City Ratner. As such they are probably unhappy about the Paul Weiss firm’s representation of the MTA. But while that might be the case, most lawyers would agree that the Paul Weiss firm did not cross the kind of ethically lines discussed here when it represented the MTA. That is provided that the MTA was not making misrepresentations, say through its Chief Financial Officer Gary Dellaverson, about it could find how no other bidder for the project except for Ratner or how it needed to rush the project forward in 48 hours without one. But the ethically rules pertaining to litigation are also different from what we have been discussing.

The Paul Weiss firm’s “Legal Ethics: Real World Issues and Considerations” was a very good program and, like all good educational programs, thought provoking.

Thursday, April 21, 2011

With recent confirmatory revelations that the design of the Forest City Ratner/Mikhail Prokhorov arena was definitely not intended to accommodate a professional hockey team, it is worth circling back to examine again the language included in the official statement to sell the bonds that strongly conveyed the impression that it could do so.

"we made some pretty deliberate decisions early on: we weren't going to have a [professional] hockey team."

That’s a confirmation of something that seemed pretty obvious looking at the schematics: the redesigned arena is far too small to accommodate a standard professional size hockey rink. (See images above and below showing the size of the rink that would have to be crammed into the planned arena and somehow work with seating, entrance and egress.

But what were the buyers of the bonds for the arena told in the information that was part of the official statement, the disclosure document used to sell bonds? They were told:

For purposes of this analysis, it has not been assumed that the New York Islanders would relocate to the Barclays Center.

OK, that language says that it has “NOT” been “assumed that the New York Islanders would relocate to the Barclays Center” but doesn’t it by any reasonable standard imply that, with luck, there is a legitimate possibility Islanders or another professional hockey team could decide to relocate to the arena? Let’s put it this way- Say a developer was trying to finance a building on the banks of the Gowanus Canal prior to the pending superfund cleanup of the toxins: Wouldn’t this be just like their saying in the prospectus that it has “NOT” been “assumed that the residents of the building will immediately appreciate the opportunity to swim luxuriously in the waters of the world-famous canal”?

As such, if the bonds for the arena one day default, as they could, will bond holders be able to sue on the basis that this statement misleadingly misrepresented the arena’s potential uses and revenue sources and therefore its value? If not, the non-positive statement at least says something negative about Forest City Ratner’s business ethics in its willingness to convey misimpressions with craftily constructed non-promises.

The recent Atlantic Yards Report story says that Mr. Sanna described the problem with introducing hockey into the smaller redesigned arena in terms of a lack of “good hockey sight lines” and that the arena seats can only be moved “in one direction,” but the impediments would seemingly be much more profound. Just look at the visuals. (More visuals and measurements here.) Perhaps, with a fair amount of jury-rigging, there would be a way to occasionally squeeze a truncated, less than professional-spec ice rink into the space, but even that looks like a challenge, let alone have a professional team play games there on a regular schedule. The problem was really sight lines?

Mr. Sanna may have been knowingly soft-pedaling the arena-as-hockey-venue problems. Mr. Oder of Atlantic Yards Report pointed out that Mr. Sanna was “incomplete, misleading, or erroneous” in at least one other statement to the audience: Although the entire Atlantic Yards mega-project, with its projected 16 towers beyond the arena, is likely to take at least the 25 years currently provided for in the documents, Mr. Sanna spoke about how it was “contemplated to be built out over the course of six years.” The very best that Forest City Ratner could be hoping for in six years would be the completion of only the very first phase of the project.

If the bonds do eventually default, the purchasers are going to want their attorneys to go looking for articles like Mr. Oder’s that reveal what the real thinking was when the misleading negative non-promise was inserted into the bonds' official statement. But they might not immediately realize that such evidence is available to be sought out. Other Atlantic Yards Report articles show that a gullible press (Fox Sports and the Daily News) is playing along with Forest City Ratner’s coy perpetuation of the notion that they still might think hockey is possible in this smaller arena:

On Fox: When an interviewer asked about hockey and a professional team like the Islanders playing there, Brett Yormark (Nets Sports and Entertainment CEO, and essentially a Ratner/Prokhorov employee) called it:

a "a multipurpose venue" and said they were open to many events. "We would love the Islanders to play a couple of games at the Barclays Center," he said, noting that the Long Island Rail Road could directly deliver Islanders fans.

Not mentioned in the previous Noticing New York post is that the Times article had this very interesting tidbit:

For his part, Mr. Bloomberg seems aware that symptoms of “third-term-itis” have manifested themselves. For weeks now, he has been using his own money to pay for campaign-style advertisements, nominally to bolster his battle with the teachers’ union, but widely taken as an effort to lift his sagging approval ratings.

I caught one of these personally financed Bloomberg “campaign-style advertisements” the other day (it ended with the legend: “Paid for by Michael R. Bloomberg”). Whether it was nominally or otherwise intended “to bolster his battle with the teachers’ union” or “an effort to lift his sagging approval ratings” it, surprisingly, prominently devoted precious moments of its 30 seconds to promoting Bloomberg’s big, city-assisted real estate developments. We are able to discern that the ad is talking about such real estate developments from the assisting visuals (see above/below) even though the projects are euphemistically referred to obliquely only as “critical job creation projects.”

Bloomberg announced just today that he is forming a "campaign committee" to oversee his spending to promote his positions and that his spending, to date, is in the "upper six figures." Does that sound like it's about to hit one million dollars? Mailers have also been landing in peoples mail boxes but, so far, not ours.

Surprise: The Best Defense for lack Of Project Headway?

It is a surprise that Bloomberg should be promoting his city-assisted real estate developments given that Bloomberg, now into his third four-year term, has made so little headway with any of his mega-development dreams. Truth to tell, most of the `jobs’ they have so far created have been only for those in the demolition trades. With all the demolition it is perhaps not so surprising that New York is not growing anywhere near as fast as Bloomberg expected. After all, the necessary corollary to “if you build it they will come” must certainly be, “if you tear it down they will leave,” certainly if you don't replace what you tear down.

During the era of Robert Moses, another famous tear-down artist (or should we say tear-down “mad scientist” rather than “artist”) the population of the city shrank dramatically. To be completely fair, Moses was also building a lot during this era, though much of it for cars that helped accelerate the departure from the city Moses' other policies were helping to foster.The projects initiated under Bloomberg have all so far involved mostly just destruction: Atlantic Yards, Willets Point, the Columbia University’s takeover of West Harlem, Coney Island. Hudson Yards on the West side of Manhattan does not involve destruction except to the extent that its oppressive scale will likely detract from the benefit it will provide long term. But even though that particular mega-project did not require any Bloombergian-brand destruction to proceed, it has not preceded.

Even the most necessary projects that Bloomberg was handed as relatively ready to go when he took office have languished, Moynihan Station (which could be helping to jump-start the languishing Hudson Yards) is one key example. The very slow-proceeding replacement of buildings at the World Trade Center site should also be mentioned as one of the most unfortunate examples of a blank slate. We are now approaching the tenth anniversary of that site’s demolition and Bloomberg, who took office only months after 9/11 has been in office almost that entire time. Bloomberg’s focus in that neighborhood was: i.) sending federal Ground Zero funds to his pet Waterfalls project, and ii.) the special benefits and variances his administration gave allowing an extra large Goldman Sachs building to go forward across the street from the Ground Zero site where it would override and diminish the quality of the carefully thought-out Battery Park City plan while competing with the Silverstein Ground Zero buildings.

It is also surprising that Bloomberg is advertising his languishing city real estate projects as “job creation projects” given that, for instance the Atlantic Yards arena is now mainly famous for the jobs it isn’t creating while the housing to be constructed is now conspicuously in the news for the cutback in jobs associated with the developer’s announced intention to shift to modular construction, building the tallest modular building in the world (if this pushing-the-limits of technology is permitted), and perhaps making the densest area of North America a forest of such units.

Even if one focuses on the construction industry jobs stimulated by the Bloomberg administration’s massive up-zonings of certain areas around the city, those temporary construction jobs must, in areas like Williamsburg, be weighed against the many blue collar jobs were simultaneously lost with the abrupt and total zoning changes that were passed. Now in Williamsburg there is an oversupply of new luxury units along the water while just a little further inland we witnessed a wholesale abandonment of new residential construction projects (caused by the financial crisis) lying fallow on formerly occupied industrial sites that provided the kind of jobs and economic activity that would likely have survived that downturn.

How NOT to Produce an Affordable City

It is true that economic growth fosters population growth, but perhaps more important, population growth (and sometimes economic growth) is spurred by affordability. There are only so many wealthy people in the world. The parts of the country growing the fastest are generally where new residential units can be produced quickly and cheaply. In theory, the Bloomberg administration is interested in generating many new units in order to foster growth. But Bloomberg’s destructions do not necessarily result in an increase of affordable units. They are more of a churn, or something worse. Atlantic Yards provides a sorry example.

Atlantic Yards involves tearing down existing housing units, many of them exceedingly affordable, and replacing them, in time, with a greater number of less affordable units. While those units will be replaced in time, in the interim they are being replaced with nothing at all. (The interim will involve several decades during which we can measure an associated population drop.) Even if the units are eventually replaced as planned they will be replaced by diverting and misallocating housing subsidies from other projects where those subsidies could be more effectively used to provide more affordable housing (more of it and at lower cost) without the destruction of existing units involved at Atlantic Yards.

The Percolated Popping of the the Population Projection

Bloomberg’s preoccupation with a predicted growth of the city’s population began at the very beginning of his second term. At his second inauguration on January 1, 2006 (lack of progress building at Ground Zero was already an issue) Bloomberg made the point then that, “our population is at an all-time high.” That same month Bloomberg disclosed that city planners were drafting a strategy to deal with this expected growth and then in mid-February the administration officially announced that the population was expected to go from what the administration then estimated was a record 8.2 million at that time to nearly 9.4 million in 2025. (See: By 2025, Planners See a Million New Stories in the Crowded City, by Sam Roberts,February 19, 2006.)

Was the city’s population then really the 8.2 million the administration says it was in January of 2006? The brand new census figures state that the city’s population grew only 2.1% in the last decade and is currently 8.175 million, lower even than what the administration estimated in 2006. The Bloomberg administration is disputing the new census figures, in part because the lower than predicted numbers found by the census may cause the city to lose aid, but there is thinking that these numbers may be right. Back around the time the city promoted its 8.2 million estimate it had also been disputing lower numbers found by the census and lobbying the Census Bureau for revisions to adjust the numbers upward, with success. According to the Times, writing in early 2006:

The latest official census figures actually showed a slight decline in New York State's population. But, on the basis of housing construction, the city has successfully challenged recent city estimates, and the Census Bureau has accepted the city's figure of 8,168,338 as of 2004.

No matter whose figures you take that would mean that the city population has been hovering at a nearly unchanging level since 2004.

The census had accepted the boost to that 8,168,338 in the fall of 2005 based on statistical work done by the director of the population division of the Department of City Planning, and his colleagues in other branches of city government, Joseph J. Salvo, and according to the Times, “his colleagues in other branches of city government.” (See: With New York Help, Census Finds 64,000 New Yorkers, by Sam Roberts, October 4, 2005.) These administration officials found another 64,259 New Yorkers (“as many people as live in all of Santa Fe, N.M.,” points out the Times) not by use of statistical sampling, but instead uncovering “housing units and people that the census had missed.”

The Times article quipped:

The revisions have also propelled Dr. Salvo's name into the lexicon of American demography. John H. Mollenkopf, director of the Center for Urban Research at the City University of New York Graduate Center, called it "the Salvo effect."

The problem, in retrospect is that the census is unlikely to have missed the same units all over again when doing the new census just out. Also, back then the figures were interpreted to mean that as contemporaneously reported by the Times, “between April 2000 and July 2004, the number of New Yorkers grew by a total of 160,060, or 2 percent.” In other words, in four years the city was supposed to have grown the same 2 percent it is now suspected the city actually grew in the entire last decade.

The census now estimates that the city grew only 2.1% in the last decade. At that rate, it will take the 8.175 million population the census now estimates to be the city’s population until the 2080 decennial census to reach the 9.4 million figure the Bloomberg administration, in 2006, estimated the city would reach in 2025.

When in February 2006 the Bloomberg administration released its prediction that in the next 19 years the city would grow by another 1.2 million those projections were closely linked with Bloombergian rhetoric calling for major development throughout the city. In April of 2007 the Bloomberg-projected growth was included in the unveiling of the what is referred to as Bloomberg’s 2030 Plan or PlaNYC Although the Estimate of Growth Was Ever So Slightly Moderated. (See: Mayor to Unveil 25-year Outline for Greener City, by Diane Cardwell and Charles V. Bagli; William Neuman contributed reporting, April 20, 2007.) The Cardwell/Bagli times article about the mayor’s Earth Day hyped new plan opened with the population projection:

With New York's population expected to grow by one million in two decades, Mayor Michael R. Bloomberg will call on Sunday for a raft of ambitious and sometimes contentious proposals that are intended to ease traffic congestion, reduce air pollution, build housing, improve mass transit and develop abandoned industrial land.

Let’s see: 2007 plus two decades would be a population of about 9.4 million by 2027. The Mayor’s actual website for the plan is only a tad more circumspect in its estimates:

Our spectacular recovery has catapulted population to a record high - 8.2 million. By 2030 more than nine million people will live in New York.

Interestingly, since the new contradictory numbers were released by the Census Bureau the city has changed neither this text nor the accompanying chart showing the city reaching about 9.12 million in 2030. (See image below.- If corrected the second green triangle approximately over 2010 should be down more or less level with the blue square over the year 2000.)(Chart from PlanNYC website.)

Bloomberg's Record on Statistics

Inaccurate representation population statistics should be added to a growing list: While the Bloomberg administration proudly revels in its image of having a hard-nosed statistics orientation, in October of 2009 the Times ran three separate stories about different areas where figures being provided by the administration diverged from reality. Its numbers were reportedly off in the areas of: School test score improvements, addition of affordable housing units (as many were being lost as created), and the lack of job creation and quality job creation.

It is not that development and growth in New York City isn’t a good thing. It is. Among other things, more people living more densely in cities is good for the environment. Also, as Jane Jacobs pointed out in her Economies of Cities, city dwellers are also more economically productive and creative of new technologies. Much of the entire world economy takes place in very short list of the world’s largest cities. The world’s largest 150 cities account for only 12 percent of the global population right now, but they account for 50% of global GDP (“Gross domestic product”) or economic activity and that percentage is headed even higher. (See: How much global GDP do the world's 150 largest cities account for?, Marketplace Morning Report, Wednesday, April 13, 2011.) GDP isn't a perfect measure of value but that figure does communicate the gist of the idea that cities are productive places.

So there are reasons to strive to allow New York City to grow. But there are plenty of opportunities for the city to grow without the accompanying Bloomberg-style destructions.

The Absence of Population Growth Under Bloomberg

Why hasn’t the city grown significantly under Bloomberg even as he announced that this is what he has been directing his efforts towards? The February 2006 Times story initially announcing Bloomberg’s grand projections contain a clue, a quote from Robert D. Yaro, president of the Regional Plan Association:

“One way to keep these forecasts from happening is to make it prohibitively expensive to live and work here.”

This is essentially a pithy recap of what we reviewed earlier in this post with the precept that population growth (and sometimes economic growth) is spurred by affordability.

Is New York getting to be a more expensive city? Here is another window into the economy from September of 2007 to help answer that question:

Since Mr. Bloomberg took office in 2002, the city budget, adjusted for inflation, has swelled faster than it has under any other mayor during the last 27 years, increasing by 23 percent, to $60 billion.

By contrast, spending rose 8 percent during Mayor Rudolph W. Giuliani’s eight years, and 4 percent under Mayor David N. Dinkins, who served one four-year term. Mr. Bloomberg’s spending also outpaced that of Mayor Edward I. Koch, who increased the budget by 19 percent over his last two terms.

The point is not that Bloomberg increased spending 23 percent when the population was increasing less than 2 percent. The point is that he was able to do it and how he did it. He increased borrowing (which was appropriate after 9/11) and eventually raised taxes, fines and fees. The thrust of the above Times article is that Bloomberg’s salvation for all the extra spending was on the revenue side:

“He does look to the revenue side to meet needs,” said Charles Brecher, research director at the Citizens Budget Commission, a business-backed research group and a co-author of “Power Failure,” which studied New York politics and policy from 1960 to the early 1990s.

The revenue came mainly from the economy which is to say that it came from the concurrent Wall Street and real estate booms. Much less came from new fees and taxes:

Although the rise in revenues is overwhelmingly due to growth in the economy, roughly 15 percent of the increase resulted from Mr. Bloomberg’s imposition of new taxes* and fees, primarily the property tax increase, according to an analysis by the Independent Budget Office, a publicly financed research and policy agency that does not report directly to the mayor.

(* On of the subheads that appeared on the screen during Bloomberg-financed commercial was “No New Taxes”.)

Ironically, at the time Mark Page, then the city’s budget director, posited that there was “a major increase in revenue that has enabled us to cut taxes and spend more” resulting from a growth in the economy and the population. There have been a few things Mark Page wasn’t right about but given that it now looks like the population apparently wasn’t growing significantly, for Mr. Page to be at least partly right about this assessment of the city’s budget dynamics which he was in charge of understanding, revenues must have grown without the population growing.

There are two not so comforting answers to how this could be so. One is that, as Noticing New York assessed before, much of the revenues were short-term, up-front revenues derived from the real estate building boom. That is a problem because this short-term revenue is taken in all up front and as it is fluctuating or volatile it can at any time cease for long periods. It is also a problem to the extent that the revenues are derived from (and place a premium on continuing) a churn where existing city assets that are torn down are not necessarily replaced with assets that are equal to or better than those being lost. (Remember that with Atlantic Yards and the Columbia takeover of West Harlem there will be long intervening periods when we will get nothing.)

The other discomforting answer is that the revenues have been coming from the super-hyped up Wall Street economy. That economy, which faltered briefly during the financial crisis before it was saved by a rescue package targeted to its preservation, may one day suffer more permanent setbacks. Some of the ubiquitous new hedge funds may be creating and exporting world-wide value depending upon their particular operations. But surely others may be better compares with high-stakes gambling operations that reshuffled wealth to those spinning the wheel. How long are we to rest assured that these routines will be permitted to continue?

Surely push-back against the industry is a possibility when the operations of our urban financial centers are viewed as exporting to the rest of the country, and other nations like Iceland and Ireland, the impoverishment of crashing bubbles.

More Rich New Yorkers, A Group Apart

In the meantime those hedge funds pay taxes and generate some very rich New Yorkers. That does not necessarily mean that the city is more affordably attractive for the rest of us. Though the Wall Street incomes are going up, New York Area Median Income (the mid-line income level that 50% of us are above and 50% below) has been relatively stable. The annual median income figures that HUD uses to determine housing program eligibility have the New York area’s median income going up 10.85% (before adjustment for inflation) from year 2000 to year 2010, from $56,200 to $62,300. (The HUD figures involve occasional anomalies too complicated o explain here but these figures are fair and representative for the discussion here.) Meanwhile, according to figures from Edward L. Glaeser, whom we will say more about in a minute, average per worker income in Manhattan (total salaries divided by population) has been going up at a far faster rate than nationally and far faster than the area median income figures just recited:

Between 2000 and 2008 (the latest year available from County Business Patterns) payroll per worker in Manhattan increased by 35 percent (7.8 percent in real terms — that is, after adjusting for inflation) to $102,000. Over the same period, national payroll per worker increased by 25 percent (for no real gain) to $42,000.

Glaeser’s figures are only the 2000 to 2008 years available to him. The HUD New York area median income figures for those same years went up from $56,200 to $59,700, or 6.22% compared to the 35% average income figure increase presented by Glaeser. Glaeser points out that in real terms, after adjusting for inflation his figures represent a 7.8% increase. After adjusting for inflation the HUD figures represent a 14.2% decrease in buying power. While these figures may be challenged as less than perfect for exact comparisons they clearly do well enough make a point that people probably generally sense anyway, that measurable incomes are going up at the upper end of the New York income spectrum with the average salary being dragged up by Wall Street’s salaries but declining for the typical Joe.

Edward Glaeser, an economics professor at Harvard, blogging in the Times notes three things about the residential unit count in New York City that explain the population’s rise by a mere 167,000 individuals in the last decade:

1. “the city ended up adding only 170,000 units over the decade, a 5.3 percent increase”

2. “Typically, population increases by a few percentage points less than the housing stock increases because of shrinking household size”

3. “the city’s measured vacancy rate increased to 7.8 percent in 2010 from 5.6 percent in 2000, which means 80,000 fewer units being occupied” (In other words of the only 170,000 units added over the decade there was a net addition of only 90,000 occupied units.

One thing to note about the 7.8 percent vacancy rate Glaeser cites is that it is an average vacancy rate and that, because of rent regulation, vacancy rates tend to be higher at the upper end of the market where market prices prevail more often rather than being held artificially low in the case of many regulated units. That means that an even greater proportion of the vacant units are likely to be amongst the new supply of luxury units added by the Bloomberg administration policies.

Luxury living also suppresses population in relation to the housing supply in another way: Disproportionate increases in wealth can also effectively empty space (akin to what you get with shrinking family size) when, for example, the wealthy hedge fund manager decides to empty a Brooklyn Heights building that was previously occupied by ten families in order to reoccupy it with his or her family as a private townhouse, or similarly when a wealthier family buys and intends to occupy three apartments in a cooperative rather than one. If the market isn’t building additional units for the people getting pushed out the result will be higher housing prices and/or people leaving the city.

There is a theory about adding to the housing supply known as “filtration.*” It is a rough cousin to the theory of “trickle-down economics.” The idea is that the superior purchasing power of those in the upper end of the market can be harnessed to generate the construction of additional new housing units (much like construction the Bloomberg administration considers it is fostering) and the rest of society can benefit as older units are cast off by the upper classes. But this theory isn’t going to work the way it is supposed to if disproportionate increases in income at the upper end of the spectrum result in proportionately greater consumption of housing by the wealthy, say for example by buying infrequently occupied pied-à-terres.

(* “A survey that he conducted when he was a city housing official, Dr. [Frank S.] Kristoff [formerly chief housing economist in the Wagner and Lindsay administrations] said, showed that there were 2.4 moves within the city for each unit constructed. `If you build for the market, very effective filtration takes place,’ he said.” - See: Private Sector Is Paralyzed In Housing Slump Here; Nonsubsidised Housing Still In Slump,by Alan S. Oser, February 15, 1970.)

Show Me the (Lack of) Money!(Note: The Albany Times Union story selected for its headline about state fiscal woes appeared just days after this Atlantic Yards Report story about how Bloomberg appointees had neglected their fiduciary duties as board members in raiding funds from the MTA for the developer of Atlantic Yards.)

Bloomberg’s self-financed commercial (that we originally started talking about) begins with a whiny complaint focusing on how New York City has run out of money and positing that it's not Bloomberg’s fault:

New York City: For decades we’ve sent billions more of our tax money to Albany than we got back. Now a state budget crisis is leading to hundreds of millions in budget cuts, cuts that threaten New York City teacher layoffs.

“Billions” . . “hundreds of millions”: It would be good to put such figures in perspective.

Bloomberg called the state budget an “outrage” when upon its announcement the city estimated that it got only about $200 million in benefits from the state budget of the $600 million the city requested. And, as highlighted in an ensuing City Hall press release, Bloomberg focused in on $300 million in revenue-sharing funds directed to the city that the new state budget was cut out.

The federal budget cutbacks in progress will also affect the city but, unlike the state budget cuts, the Bloomberg administration has gone low profile about criticizing them. Prior the April 8, 2011 compromise that averted the threatened shutdown of the federal government there were estimations that the city would be sorely affected by the federal cutbacks. (See: Republican Federal Budget Would Force Huge Spending Cuts On New York City, Gus Lubin, Jan. 25, 2011.) After the compromise there were brief announcements passed on via local radio that Bloomberg officials were studying the effect of the cuts on the city but subsequently there has been no New York City follow-up (although the projected negative effect on New Jersey cities across the river has been covered). Is Bloomberg’s low profile on this related to presidential ambitions?

Pending what more we might hear about this from the Bloomberg administration, here are the kinds of figures from proposed federal cutbacks that were of concern prior to the compromise: $150 million more cuts for the MTA, a $5 million cut for law enforcement, and a $9 million loss in pre-K Head Start funding.

All of these figures, the $300 million loss in state aid, the proposed $150 million + $5 million + $9 million cuts in federal aid are offered to put in perspective the $2-$3 billion being spent on a mega-monopoly like Atlantic Yards. Atlantic Yards is all being handed to one developer without bid. (See all the piles of cash in the Bloomberg commercial image above?)

It is true, the exact figures of what Atlantic Yards will cost haven’t been recently re-calculated (with shifting facts they ought to be) but the casualness with which the duty to calculate such figures has been ignored by the Bloomberg administration is part of the problem, together with the fact that the administration has never forthrightly and honestly presented these costs to the public. $2-$3 billion, my own calculation (that allows substantial room for error within the $1 billion range stated) is still accurate.

Not all of that $2-$3 billion will be spent in one year, as with other figures cited earlier which are annual budgetary amounts. It is also true that not all of the $2-$3 billion is city money (it is a co-funding mixture of city, state and federal money) or that it will all be spent during the three terms of the Bloomberg administration, but it is true that through his actions as mayor Bloomberg is seeking to commit the public to a totality of expenditures in that amount while he is in office.

The Core of the Problem With Bloomberg's Mega-Projects

These expenditures are a red flag advertisement to state and federal officials that the city doesn’t seriously need money, that when we have it we can afford to spend it frivolously even when we are advancing the most substantial portion of that for a basketball arena (the Ratner/Mikhail Prokhorov arena) which it has been calculated will result in a net loss to the public. That net-deficit-to-the-public arena was recently declared the “core of the project” in the state senate hearing testimony of Kenneth Adams, the man nominated to run ESDC, the state agency theoretically overseeing the project, thereby with Bloomberg’s aid, getting around the city reviews of and public participation that would otherwise have been required.

Merriam Webster provides these definitions for what Mr. Adams likely meant when he referred to the arena as the “core of the project” (I don’t think he was analogizing to the stripped-away inedible remainder of piece of fruit somebody might hand you):

• a central and often foundational part usually distinct from the enveloping part by a difference in nature • b : the essential meaning : gist • c : the inmost or most intimate part

The "most intimate part" sometimes means or implies the most `honest' or part or part most honestly representational of the whole.

If such a money-losing frivolity as the arena is “the core” of the significant large-scale expenditures Bloomberg is mobilizing, why then should the state and federal government send more money our way? And with money being spent so frivolously by Bloomberg, is it any wonder that the city, pursuing policies with the rhetoric of intending growth, has become too expensive for a growing population to reside here?

Bloomberg self-financed a 30 second advertisement to laud his accomplishments. Imagine what we might have had to talk about in this post if the ad we were considering had run a full minute.

About Me

NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com